They should all be sold to farmers, unless they are needed for specific purposes such as conservation or treaty claims.

We do not need the Government owning and running 137 farms.

The company had shareholders’ funds of about $1.5. billion against total liabilities of $360 million, according to its half year report to the end of December.

But it made a profit of just $1m in the last six months of 2014, down from $13.4m in the same period in 2013.

If you sold Landcorp for $1.5 billion, then the reduced interest on debt would be around $75 million a year.

English said other SOEs faced challenging issues.

“Post’s business is shrinking, TVNZ has to deal with competition from Netflix and everybody else, the Public Trust, Kordia has a set of broadcast-related assets when technology has moved on.”

Yep. Once TVNZ could have been sold for over a billion dollars. Today you would not get $100 million. The state is not a good owner of commercial companies. Let the state focus on its core responsibilities, and let the private sector own the farms and other businesses.

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Comments (51)

AgentBallSack

If you’re managing 400,000 hectares of land and only making a $1 million dollar profit you’re doing something badly wrong. Forgive me if my maths are wrong but at 1.5 billion dollars of shareholders money, wouldn’t the dividend be 1.5c in the dollar?

igm

billmurray

Articles 138 and !41 of the NZ/ Chinese free trade agreement ( which Labour negotiated ) gives Chinese investors the right not to be treated less favourably than NZ investors when buying residential real estate. I am not sure if that would apply to farms ?. We should ask Phil Twyford as he claims to be an expert on China and Chinese surnames.

georgebolwing

I think you will find the secret of Landcorp’s continued existence in the high country leasehold farms. As I recall, the land in question was leased on very concessional terms to a select few as part of a policy dating back to the 1930s, if not earlier, to stop aggregation of farms.

Attempts to places the leases on commercial terms or sell the land at its true value, have been resisted by the lease-holders for obvious self-interested reasons.

MT_Tinman

thedavincimode

grief

Nothing wrong with the deer job. In terms of stock units, they look to have the greatest exposure in dairy and yet even after the boom 2014 season, when the beef job went gangbusters too, they look like shit. 2/3 of its revenue was coming from sectors going through the roof and they still couldn’t make a buck (maybe there was some significant write down on something – those numbers don’t tell a tale). 2015 won’t be impressive for sure.

Add to that the cost of all little angry’s ambulances and helicopters flying 24/7 to remote locations to rescue hurt workers and it’s sure looking a lemon.

Dave Stringer

Any time a government is engaged in competing for revenue and profit with a non-government agency it is doing something wrong. Governments role is to regulate commerce and industry, provide essential infrastructure and services at cost, and provide a safety net for those unable to earn a living (note, not a life style). Doing anything else can be construed as abuse of power in my view.

PJM

David, you wrote: “If you sold Landcorp for $1.5 billion, then the reduced interest on debt would be around $75 million a year.”

Correct, but do you realise that the Reserve bank of New Zealand (RBNZ) could easily create new electronic money free of interest and free of debt and gift it to the government to pay off ALL of the debt that government owes to commercial banks. Upon receipt of each loan principal, which is really an IOU from the bank, the bank would simply cancel its IOU and the money would effectively disappear back into the nothing from whence it came.

Also, the RBNZ could easily create new electronic money free of interest and free of debt and gift it to the government to pay off ALL of the debt that SOEs owe to commercial banks. Upon receipt of each loan principal, which is really an IOU from the bank, the bank would simply cancel its IOU and the money would effectively disappear back into the nothing from whence it came.

The effect of this Sovereign Money creation by the RBNZ would be to deprive commercial banks of a lucrative slice of their income, and ‘we the people’ would all benefit through not having to pay so much in taxation — i.e. the tax that is used to pay the government’s interest bill to the banks.

All of this has nothing to do with socialism, capitalism, left-wing or right-wing politics, or the redistribution of wealth. I am confident that if truly informed, the people of New Zealand would choose to have a Sovereign Money banking and monetary system – giving us people’s capitalism. We would be truly free at last!

Sovereign Money is now official policy of the NZ First Party, and also the Green Party of England and Wales. In addition, there is a new party in Denmark’s parliament advocating a Sovereign Money policy, and Iceland’s parliament is currently giving it serious consideration.

AgentBallSack

When you consider they have over ten percent of the deer farmed in nz and only 2 percent of the beef or dairy it is a big number Te Davi.
The quality of land in their holdings may explain some of the bias towards deer.

holysheet

Griff the reason for so many bambi’s is because most of landcorps farms in the south island are isolated deer farms. Hill country stations lend them selves well to deer in the SI.
I am not fussed about this number of deer as the farms are not much use for anything else.
But I agree govt should sell these farms to NZ farmers only. They used to use these govt blocks for ballot farms as a means of getting young farmers onto the land. Dividing up these farms for smaller units and selling them to the lucky ballot winner was seen as a good way of getting farmers onto the land who otherwise couldn’t afford it. I think it was liabore who scrapped this good idea as it was seen as being helping only a few at the time.

Fentex

They should all be sold to farmers, unless they are needed for specific purposes such as conservation or treaty claims.

Until all the Treaty claims are settled the government doesn’t know if it’d need some land to make restitution with. And productive land tends to accumulate wealth, so a bank of land, especially developed as a business, is a pretty good place to have wealth that might settle such claims waiting.

If you sold Landcorp for $1.5 billion, then the reduced interest on debt would be around $75 million a year

You need to factor land value appreciation into that comparison as well, and that’s pretty good compared to interest rates these days.

Once TVNZ could have been sold for over a billion dollars

But instead it paid dividends. You need to include them in any such comparison as well.

Jack5

Or Landcorp could lease out the land. Under the sweetheart deal Chris Finlayson (now Treaty Minister) negotiated on behalf of Ngai Tahu, State-owned farms sold in the South Island will be offered (first and second rights of purchase) to the tribe. Perhaps North Island tribes have similar rights.

Has something gone wrong with Landcorp? Are there consultants the Government as shareholder can sue?

The chief executive, Steven Carden, before joining Landcorp in August 2013, was general manager of PGG Wrightson Seeds Australia from 2010. Steven began at PGG Wrightson in 2008 as group manager of business development, serving also on the NZTE Beachheads Advisory Board. From 2003 to 2008, he worked at McKinsey & Company (didn’t Cunliffe work for them at one time, too?). He has an MBA from Harvard.

Tarquin North

labrator

Again, why do you use Stuff as a source of accurate information? You can read the annual report yourself where it says:

Revenue growth on all farm products led to net operating profit of $30 million. Annual dividend of $7 million to be paid

Also I can’t actually find where they’re getting the $1m profit figure from. The half yearly report has the net operating profit at $1M but the net profit after tax of $62M because of “Gain due to price changes on livestock”…

thedavincimode

You need to include them in any such comparison as well.

Wrong. The relevant comparisons are risk-adjusted opportunity cost of the capital invested and return on investment. Unless dividends were gouged at such a rate and so far in excess of earnings as to blow borrowings out of the water, they won’t have any significant effect on value determined by capitalisation of earnings (the relevant measure).

SPC

thedavincimode

Balckie at 4:51 pm

At times I despair at the hypocritical closet control freak socialist views of commentators here who see themselves on the political right and then along you stroll with yet another sad-arse gob of stupidity that makes me realise that they aren’t so bad after all.

thedavincimode

Fentex

The relevant comparisons are risk-adjusted opportunity cost of the capital invested and return on investment.

I don’t disagree, I only commented to say DPF’s numbers were incomplete. If someone wanted to figure out the income or expense to the public of Landcorp’s assets they’d have to do a lot more with more detailed information than presented by DPF, which was my general point.

I certainly wasn’t claiming the few oversights I referred to were the whole of the equation.

And if it turned out all of this public land wasn’t earning anything in sum that is still not a reason to sell it all into private hands. It may just be a demonstration that running a business on them is pointless and they ought be redirected to some other public purpose.

I would guess there’d be a few opportunities to swap some such property for currently private land beside public parks that would help enlarge them, or for some land that is currently private but the public has an interest in (for access to beaches, for camping near public spaces, for heritage purposes et al).

Some of it may make sense being rolled into neighbouring private farms, some of it may make sense letting go fallow to help local area irrigation by improving catchments (I’ve no idea about any particular parcel).

Some of it may be profitable and suitable for purposes like settling treaty claims.

Black with a Vengeance

igm

trout

At present Landcorp is spending millions developing ex forestry land in the mid NI for dairy farms – the land is LEASED from a bunch of Auckland wide boys. This is way outside the function of Landcorp which is to husband Crown pastoral land. Could this be another Solid Energy debacle in the making? Incidently Ngai Tahu was offered Landcorp land as part of their TOW settlement; turned it down – too much hard work. Preferred subdivisible industrial property.

Inthisdress

This is, in my opinion, a politically questionable strategy.
The first time Labour have gotten some traction with the public imagination since they lost under Helen Clark, by pushing the ‘Don’t sell to foreigners’! and National are advocating putting more land up for sale which will play into the hands of Labour who will claim National is selling us out to foreign investors.

Black with a Vengeance

Scott1

Landcorp should just sell the land gradually if it can get a decent long term price.
No fire sale just for ideological reasons.
At a guess, now is probably not the greatest time to be selling many of the properties.

KiwiGreg

50 odd thousand state owned homes, a state owned post office, thousands of hectares of land (look at all the vacant land they “discovered” they owned in Auckland); the list is (almost) endless. I wouldn’t get so excited about the farms (other than clearly the government is going to force Landcorp to sell some and you are providing air cover).